Goldman Sachs has issued a research report assigning a Neutral rating to China Life Insurance Company Limited (SEHK: 02628), with a 12-month target price of HK$28.5 based on return on total assets. This target corresponds to a 1.0x price-to-book ratio for the forecasted year 2027. Investor inquiries primarily focus on sales outlook, potential growth and disruptions in the bancassurance channel, as well as investment performance and dividends.
China Life has reaffirmed its target for double-digit new business value growth in 2026 and highlighted its competitive advantages in the bancassurance channel. Robust stock market performance in the second quarter of 2026 has already driven an improvement in investment results. For investors concerned about base effects in the third quarter, the company indicated that full-year profits should be the focus, particularly given the lower comparative base in the fourth quarter. Management also stated its commitment to reducing the volatility of dividends per share.
Key Discussion Points
New Business Value Growth
China Life attributed the significant 75% year-on-year growth in new business value for the first quarter to a higher proportion of policies with longer premium payment periods compared to Q1 2025 and a strong performance in its first-quarter promotional sales activities. The pace of new business value growth is anticipated to moderate in subsequent quarters, primarily due to a high base of comparison; there has been no change in customer demand. Encouragingly, the strong momentum from the agency channel in the first quarter has continued into the second quarter. Benefiting from the good results achieved in Q1, agents have been able to focus on selling protection-type products in Q2. Furthermore, China Life believes insurance demand may improve alongside a recovery in market sentiment and that strong stock market performance does not pose a threat to insurance sales.
Bancassurance Channel Sales
China Life emphasized its leading position in the bancassurance channel with major state-owned banks and city commercial banks. This strength was reflected in robust growth during Q1 2026 in both the number of effective bank outlets and the productivity of leading bank outlets. The next strategic phase involves strengthening cooperation with joint-stock commercial banks.
Bancassurance Channel Regulation
Regarding the "Document No. 65," which details regulations on channel fees, China Life stated that bancassurance sales across the industry might experience some disruption in late June, with the main impact concentrated in July and August. However, the company noted that its products and fees are already compliant with the new rules, and it expects limited impact. China Life anticipates that following the implementation of Document No. 65, the seven major life insurers will expand their market share due to their competitive advantages in distribution, brand, and products.
Investments
Strong stock market performance to date in the second quarter has driven an improvement in investment returns. Looking ahead, China Life noted that the third quarter faces a high comparative base but stressed that the base in the fourth quarter is much lower. The company believes investors should focus on full-year investment performance and net profit. Additionally, China Life welcomed the approval for insurers to participate in the southbound Bond Connect, noting that this market offers more attractive yields.
Dividends
China Life reiterated that dividends are an important key performance indicator for management, and the strong profit growth in recent years has supported a good increase in dividends per share. Looking forward, while profits may exhibit greater volatility under the IFRS 17 accounting standard, management is committed to efforts to reduce the volatility of dividends per share.
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